Tinubu’s Subsidy Removal Saved Nigeria From N53tn Burden, N3,500/$ — NRS Chair

The Chairman of the Nigeria Revenue Service, Zacch Adedeji, has said President Bola Tinubu’s decision to remove the petrol subsidy saved Nigeria from a potential N53 trillion subsidy burden and prevented the naira from sliding to as low as N3,500 to the dollar.

Adedeji made the disclosure during an interview with Channels Television, where he explained that retaining the subsidy under current market conditions would have placed enormous pressure on the Federal Government’s finances and the foreign exchange market.

According to him, the projected N53 trillion subsidy cost reflects what the country could have faced if Tinubu had not taken the decision to remove the subsidy in May 2023, particularly amid changing global economic conditions.

“The subsidy today would have been N53 trillion if Mr President had not removed it, given what is happening in Iran, given what is happening globally,” Adedeji said.

He further explained that continued payment of the subsidy could have intensified pressure on the foreign exchange market, potentially pushing the naira to about N3,500 per dollar.

Adedeji argued that maintaining the subsidy would have created an unsustainable fiscal burden for the government, as the Federal Government would have continued to absorb the difference between the market-related cost of petrol and the regulated pump price.

President Tinubu announced the removal of the petrol subsidy shortly after assuming office in May 2023, a major policy decision that resulted in a significant increase in petrol prices and shifted a greater portion of the cost of fuel consumption from government finances to consumers.

Defending the policy, the NRS chairman rejected arguments that the government should have first accumulated sufficient funds before removing the subsidy, maintaining that the subsidy itself was effectively being financed through borrowing.

“Subsidy is not an income. It is like you are borrowing money to buy a product and that product is N10, and you are selling it at N3,” he said.

He maintained that continuing the subsidy would have further weakened public finances while increasing demand for foreign exchange to finance petroleum imports.

Adedeji also linked the subsidy removal to the government’s broader foreign exchange reforms, arguing that the previous exchange-rate regime did not adequately reflect the market value of the naira and had discouraged investment.

He said the reforms had helped create stronger incentives for investment in domestic refining capacity while improving conditions in the foreign exchange market.

The NRS chairman’s comments come amid continued debate over the economic impact of the subsidy removal, which has contributed to higher petrol prices and increased living costs while the government pursues measures aimed at strengthening the economy and reducing dependence on imported petroleum products.

However, the N53 trillion figure and N3,500-to-the-dollar projection represent an estimate of what could have occurred under a different policy scenario, rather than an amount directly saved or an exchange rate that actually materialised.

The potential cost of retaining the subsidy would have depended on factors including global crude oil prices, domestic petrol consumption, exchange-rate movements, domestic refining output and the level of subsidy per litre.

The projection nevertheless underscores the scale of the fiscal and foreign exchange pressures the Federal Government believes could have emerged had Tinubu’s subsidy removal initiative not been implemented.